Normally, when you add the CD to the guest, you specify the ISO file to use for the CD image.

You have to specify that image before it will add. I just went through this.

BTW, the "add hardware" brings up a dialog, with an entry "Select managed or other existing storage", below that is a "browse" button where you can find the file you want (I used an install DVD iso). Once it has been filled in you can then apply the changes. It will take a reboot of the guest for it to become available. Power off the host to apply the changes.

Once it is available you can also select the boot order (if installing) before power on.